Forex volatility was limited during the Asian session, as traders stay in the sidelines ahead of the much-awaited FOMC statement.
- NZ current account deficit clocks in at 0.62B NZD vs. 0.82B expected, 0.22B surplus in Q1
- AU Westpac-MI leading index slips by 0.1% in August vs. 0.1% growth in July
- Japan’s trade surplus hits 113.6B JPY vs.104.4B expected, 418.8B in July
Abe to delay balancing of budget to later than 2020?
The yen took some more hits earlier today after reports circulated that Prime Minister Shinzo Abe could delay his plans to reign in government debt to a later date.
Remember that the government is set to increase its sales tax from 8% to 10% in October 2019 to help cover the nation’s ballooning debt due in part to caring for its aging population. Abe had targeted a return to budget surplus by 2020.
Now, sources are saying that Abe could move the goalposts to a later date. Apparently, Abe is planning on directing the extra moolah to fund education and young families instead.
This is nothing new for the PM, who has already put off the deadline in 2014 and 2016. Coincidentally, the decisions were made before national elections on both occasions.
As with yesterday’s snap election rumors, the prospect of longer period of Abenomics attracted yen bears.
Mixed sentiment ahead of FOMC statement
Asian bourses capped mid-day trading almost flat today, thanks to traders staying in the sidelines ahead of the much-awaited policy statement of Janet Yellen and her gang.
- Nikkei is up by 0.03% to 20,305.50 after hitting two-year highs earlier this week;
- Australia’s A SX 200 is down by 0.08% to 5,708.90;
- Hang Seng is up by 0.16% to 28,097.00, and
- Shanghai index is up by 0.21% to 3,363.92.
That didn’t stop commodity bulls from jumping in, though. Crude oil, for starters, saw a nice jump after Iraqi oil minister Jabar al-Luaibi shared that OPEC and other major producers are considering deeper cuts and extending the group’s supply cut deal to curb the global oil glut. It also doesn’t hurt that a report from the U.S. showed a smaller-than-expected increase in oil inventories.
- Brent crude oil popped up by 0.44% to $55.38 while
- U.S. WTI shot up by 0.72% to $50.26.
Major Market Mover(s):
A smaller than expected current account deficit energized Kiwi bulls who were already looking for opportunities to take profits from their shorts ahead of the weekend elections.
NZD/USD shot up to a session high of .7343 before settling at .7317;
NZD/JPY jumped to 81.60 before slipping back to 81.56, and
AUD/NZD slipped to 1.0921 before popping up to 1.0958.
The yen dipped lower against its major counterparts on the back of Japan’s stronger-than-expected trade numbers and rumors of Abe extending Japan’s budget surplus goals to win another national election.
The trend didn’t last for long, however, as profit-taking ahead of the FOMC statement soon took over the markets.
USD/JPY is down by 2 pips (-0.02%) to 111.48 after hitting a session high of 111.65;
EUR/JPY jumped to 134.04 before settling down to 133.85;
GBP/JPY is down by 15 pips (-0.10%) to 150.70, and
CHF/JPY dipped from a high of 116.07 to close at 115.96.
Watch Out For:
- 6:00 am GMT: Germany’s PPI (0.1% expected, 0.2% previous)
- 8:30 am GMT: U.K. retail sales (0.2% expected, 0.3% previous)